[harryh]

What he's trying to say is that his firm was contractually required to have a bid (an offer to buy) and an ask (an offer to sell) for some set of stocks.

But under certain circumstances they didn't really like this requirement so they kind of cheated by changing their bid to 1 penny and their ask to $10,000. For a stock that trades around, say, $100 this means that while they de-facto had a bid and ask in place it wasn't really a real bid or ask as no one else would ever want to trade at those prices.

[thrownawayhft]

And under the regulation we might have been required to ask at minimum $120 for that stock when it was trading at $100. If the stock had a big day and rose to $200, Nasdaq would just raise our ask to $240, or whatever exact amount the regulation required. The only risk compared to the old way of doing things was that someone would hit the stock with a huge enough order to blow through all liquidity in one shot on the way up to our ask.